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If you were in your first year of self-employment between 2002 and 2017, or paid provisional ACC levies after ceasing trading, ACC may owe you a refund. Customers receiving refunds will also receive an interest payment.

ACC will refund:

all first-year levies collected between 2002-2017 from self-employed customers who worked full-time (averaged over 30 hours per week over the financial year), did not have a mix of employee and self-employed earnings and did not cease being self-employed in the same year.

all businesses who paid provisional invoices and weren’t required to do so because they later ceased trading or changed their business structure.

ACC expects the refund process to be completed by 31 March 2019.

What you need to do

To find out if you may be eligible for a refund go to acc.co.nz or use MyACC for Business. If you may be eligible, you’ll be prompted to provide up-to-date contact details.

For more information and updates about ACC levy refunds go to acc.co.nz, call 0800 222 776, or email business@acc.co.nz

Draft legislation has been introduced to restrict the way losses from residential investment properties can be used for tax purposes. It is possible the draft legislation will change as it works its way through the Parliamentary process, but its objective will remain.

That objective is to prevent rental losses being offset against other types of income to reduce the investor’s overall tax payable. The changes will take effect from the start of the 2020 income year – ie 1 April 2019 for most taxpayers.

We will be watching the progress of this draft legislation with interest. We expect the resulting law changes will have substantial implications for investors whose rental activities continue to generate losses, or whose future intentions – for example, changed debt or financing arrangements, acquisition of additional properties or planned repairs and maintenance expenditures – may result in negative rental returns in any given year. In a worst-case scenario the proposals have the potential to prevent residential rental losses from ever being used.

There are essentially three things an investor should do before these rules come into force on 1st April 2019:

Firstly, review the maintenance requirements on your buildings. If you are budgeting for repair work in the future that would be costly enough to create a loss in your portfolio, it may be sensible to consider undertaking this work in what remains of the 2019 tax year. You have only four months left to generate deductions that won’t be subject to ring fencing.

Secondly, if you are an investor with other business interests, consider booking a consultation to discuss the possibility of moving debts in your property entities to trading businesses. For example, you may have a trading company where you can refinance a shareholder loan account or you may have imputed retained earnings that have been reinvested in the business to date. Money could be borrowed in the business and used to pay out a dividend from retained earnings to shareholders who in turn use these funds to reduce debts in the property portfolio. The resulting interest costs in the business are deductible without being ring fenced and the property portfolio’s position is improved.

Thirdly, If you do have a loss making residential property portfolio, consider booking an appointment to examine the opportunity cost of retaining low yielding properties. If a property can be sold where more interest is saved through debt reduction than the lost rental income from the property the overall portfolio becomes more profitable, and now, more tax effective.

The top accounting lists benchmark firms based on revenue, pro bono hours, gender diversity and innovation.

Key findings from the data gathered indicate a pattern in accountancy that is at the core of Johnston Associates vision and practice – people, relationships, sound advice and interpreting numbers to deliver a business advantage are the key skills that define great firms.

“Once the perception was that to be a successful accountant, you needed a calculator, a good head for figures, and a less than sparkling personality. But the top three skills for accountants wishing to be successful in the coming five years are adaptability/agility, emotional intelligence and critical thinking. Increasingly totting up the numbers, and preparing financial statements, can be done by artificial intelligence, but it still requires humans to interpret the numbers, and advise business owners on how to take their next step forwards”, wrote the Sunday Star Times in its feature dedicated to the survey results.

Chartered Accountants Australia and New Zealand chief executive Rick Ellis said: “As automation moves in, the communicators, the problem solvers and the adapters will take over. Human and technology skills will be even more in demand.”

Often the first reaction when thinking of setting up a new business or undertaking a new venture is to establish a company. Companies are familiar to us, offer limited liability, are quick and cost effective to establish (at least at a basic level) and people feel as if they understand companies. However, despite their popularity, we commonly see situations where a company is not in fact the best option, due to some of the tax pitfalls that can arise from using a company.

Some situations where companies can present problems and increased tax costs include:

• Where one or more investors have tax losses available to them (or may do in the future)
• Where one or more investors are on lower tax rates for some reason
• Where one or more investors have dependents to whom income could potentially be distributed and then taxed at lower tax rates
• Where capital gains are likely during the course of the project or business
• Where one or more investors are overseas tax resident, or where New Zealand tax residents are investing overseas.

We recommend, particularly in these situations, that consideration is given to other structures such as a limited partnership, an unincorporated joint venture, or a look through company (LTC) rather than an
ordinary company. These can be put in place and deliver the same or similar commercial advantages (such as limited liability) but also potentially much improved tax outcomes in comparison to an ordinary
company structure. This is due to the fact these types of entities don’t pay tax themselves, rather each investor includes their respective share of the overall profit or loss in their own tax return, and they can then deal with the
tax consequences of that in their own way based on their own appetite for risk and their own circumstances. This also provides greater flexibility to adapt to law changes etc. in the future.

If you’re not sure about your situation give one of our specialist tax advisers, or your usual Johnston Associates adviser, a call so you know you’re on the right track.

“Our tax system will be fairer and more balanced to encourage investment in the productive economy.” Grant Robertson.

The budget position on tax is something of a watching brief. The Tax Working Group (TWG) was a tangible presence while the Budget was read but their interim report is not due out until September this year, their final recommendations coming out early 2019. In the meantime, the measures announced include:

• Ring-fencing investors’ tax losses on rental properties so they cannot be offset against other taxable income to reduce net tax paid
• Tax credits for research and development
• Changes to bloodstock tax rules for the New Zealand racing industry attracting new investment to the breeding industry.

Compliance Agenda

There is a drive to widen the tax base. With that in mind, the Government will provide extra operating funds to Inland Revenue to collect more taxes and, in particular, to ensure outstanding company tax returns are filed. At a proposed cost of $31.3 million this is expected to raise revenues in excess of $183 million over the next four years. Taken with Inland Revenue’s tax policy work programme, there’s a strong compliance agenda to plug leaks and stop rorts to the system.

The message for businesses, of course, is to ensure tax compliance is a priority, all those i’s dotted, all those t’s crossed. Johnston Associates Tax team is here to assist you with all of your tax needs, contact us today.